By Juveria Tabassum
(Reuters) -Foot Locker's steep discounts powered a solid start to the retailer's holiday season sales and prompted it to tighten its annual profit and sales expectations, sending its shares surging as much 22% on Wednesday.
More than 200 million shoppers made purchases both in-store and online during the Thanksgiving weekend, the National Retail Federation said on Tuesday, easing some worries over muted holiday sales.
"While our customers remain discerning with their discretionary dollars and we expect that will continue through the season, we're also seeing them respond to newness," Foot Locker (NYSE:FL) CEO Mary Dillon said in a post-earnings call.
Through its Lace Up program, the company is attempting to put its own banners, such as Champs Sports, in focus and reduce reliance on sports goods giants like Nike (NYSE:NKE), which currently supplies about 65% of its merchandise.
The results also add to recent signs of an uptick in sneaker demand as reported by peers Dick's Sporting Goods (NYSE:DKS) and Hibbett.
Foot Locker now expects annual comparable sales to be down 8.5% to 9% compared with 9% to 10% earlier while the mid-point of its adjusted profit forecast range was above market expectations.
"The results were not as bad as feared... Investors on the Street were bracing themselves for another guidance cut, given how promotional Foot Locker has been recently," said Telsey Advisory Group analyst Cristina Fernandez.
Foot Locker said it was on track to end the year with inventory levels flat to slightly down year-over-year even as its gross margins took a hit of more than 400 basis points for the second straight quarter.
Third-quarter adjusted profit of 30 cents per share topped analysts' expectations of 21 cents as per LSEG data, while same-stores sales decline of 8% compared with estimates of a 10.06% drop.